I work as a Research Scholar at the Center for Health Policy and Inequalities Research at Duke University. I also am an Adjunct Scholar at American Enterprise Institute and Mercatus-Affiliated Senior Scholar. Having been trained in policy analysis at the Pardee RAND Graduate School, I have decades of experience in evidence-based health policy at the federal and state level, specializing in health services regulation and the social burden of illness. I've taught health policy and the politics of health care in the Terry Sanford Institute of Public Policy, the Duke School of Medicine and the Fuqua School of Business at Duke. My latest book is "American Health Economy Illustrated."

The author is a Forbes contributor. The opinions expressed are those of the writer.

Flight of The Millionaires: Reasons to Give Thanks For The One Percent

Who Wants to Be a Millionaire? (Philippine game show) (Photo credit: Wikipedia)

The Congressional Budget Office (CBO) released its latest tax data this month. The report details who contributed how much to federal revenues in 2009. The figures raise the question: why do so many in this country seem so eager to berate the ‘one percent’ rather than thank them for their extraordinary contributions to federal coffers?

According to the report, those in the top one percent had an average pre-tax income of $1,219,700 in 2009. Of this, they paid $353,000 federal taxes. Despite having earned 13.4 percent of the nation’s income, these individuals paid 38.7 percent of federal income taxes that year. To put it more starkly, this group makes less than 16 times as much as the average household but pays more than 40 times as much in federal income taxes.

Sure, the picture looks a little different when all federal taxes are included. With payroll, corporate, and excise taxes thrown into the mix, the top one percent contribute “only” 22.3 percent of all federal taxes. But in raw dollar terms, the average one percent household pays 23 times as much in total federal taxes as the average household—a difference of $337,700. Despite this, some politicians and activists claim with a straight face that our country’s top earners don’t pay their “fair share.”

Consider a world without such individuals—a world in which we have so taxed and vilified the most prosperous Americans that they all elect to follow Denise Rich and foreswear their U.S. citizenship in search of greater economic freedom. French President François Hollande is already learning this the hard way, as many of his country’s wealthiest individuals pack up and leave as a result of his proposed tax hike on French millionaires. Indeed, the U.S. itself has seen an eightfold increase in the number of Americans abandoning their citizenship (most, apparently for tax-related reasons). Since U.S. lawmakers have yet to show any ability to curtailing their spending, Uncle Sam would be looking to the remaining 99 percent of taxpayers to make up what would be a massive gap in income tax revenues due to the sudden emigration of the top one percent.

As a matter of simple arithmetic, everyone’s federal income taxes would have to go up by at least 63 percent to compensate for this lost revenue should the top earners depart. Such a gargantuan increase in taxes would rather substantially reduce work effort among the remaining 99 percent. The best evidence suggests that the economy loses 52 cents in output (lost work effort) for every dollar increase in individual income taxes. That means Congress would need to nearly double the rates for everyone else in order to cover the revenue gap.

Moreover, there’s a major discrepancy between the one percent’s financial support of government and its consumption of the resulting services.

If our population lost the top one percent, government could theoretically shrink spending on defense, courts, etc. by one percent to account for reduced need for services. However, since most federal payments for individuals are means-tested (ie. entitlement programs such as Medicaid and food stamps), loss of America’s top earners wouldn’t translate to a proportional reduction in these areas of the budget. And those payments accounted for more than 60 percent of federal spending in 2010.

Of course, losing the top one percent would mean far more than the loss of hundreds of billions in tax revenue. According to Federal Reserve data, this group also accounts for 30 percent of philanthropic giving. Many in the top one percent are business owners who employ many workers. In fact, nearly two thirds of those making over half a million dollars a year personally bear the risks of owning a company on their own or with just a few other shareholders. And losing the top one percent would translate to the departure of nearly 200,000 physicians—something a nation facing a doctor shortage could ill afford.

Like most Americans, I do not expect to enter the ranks of the top one percent (which in 2009 included one-person households with incomes exceeding $282,900, two-person households above $400,100, etc.). Perhaps I am totally deluded, lacking in class consciousness, or simply a victim of the Stockholm syndrome. But the way I look at it, I’m eminently grateful for those who have worked to attain this lofty status. I wish the current political elite felt the same way.

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Wowee! When your done with your knee-pads, can I borrow them? So, if the poor don’t have money? The middle doesn’t have money? Where is the money to pay the nations debt? We can cut welfare and entitlement programs, but that is not going to happen and we know it! We could cut the military, but that is not going to happen! So who does that leave? The vaunted “Job Creators” want another tax break and more deregulation to invest into another bubble, take their profits, and then create a economic hierarchic similar to Mexico. No thank you! You’ve had your breaks since 1980. Time to give back all of the tax breaks you’ve borrowed over the years. Don’t give me all of the rhetoric about you pay too much, or your fees and closing loopholes! You don’t want to willingly share? Fine! Then the government should make you share! You want to leave the country? Fine! Go! Live in a place where the tax rate is more to your liking, and see the squalor it creates! But hey, at least you’ll have friends there!

The one item that many on the Right fail to mention when it comes to share of taxes is disposable income. The wealthy have much more of it than those who aren’t wealthy, so it only logically stands to reason the wealthy should pay a bit more proportionately of their income. Even Adam Smith said as much (I’m not talking about his often misquoted and misused, by both the Right and the Left, statement on luxury items).

E. N. Wolff finds that the top 1%’s share of net worth is about equal to their share of taxes, and their share of net wealth is higher yet. As a class, their earnings have gone up steadily and far more than any other group for decades. CEO pay has grown to a staggering multiple of average worker pay.

We saw the economy grow, 1% incomes grow, and some growth in wages through the 90s, with higher taxes. We saw taxes lowered and 1% incomes grow through the 2000s, but the economy slowed and waves lost ground. Your essay is sycophantic worship of a system which continues to trickle wealth upward.

The article sounds like some sort of sociological commentary. Unfortunately the most important sociological issue is not addressed at all. That issue, is the only true sociological facet of any taxation argument. That issue is, how do my tax payments impact my household’s bugdet and standard of living? For any of your arguments to hold any sociological weight, the standard of living and and discrecionary income would all have to be nearly equal. As it is, those who are not in those top percentiles have a far more burdensome tax burden. The tax code with it’s many loopholes is far from truly progressive. I am not in any sense envious of the wealthy, because I believe as Scripture states, that to those whom much is given, much is expected. Morally, for any wealthy person in the U.S. to not feel like they must do something to help the nation out of this recession is perverse in it’s egocentricity. They should all be thankful that their wealth was in great measure facilitated by the American worker, the American consumer, and the laws and regulations of this free enterprise capitalist Republic we all live in. To assert otherwise is bizare in it’s egocentric arrogance. Good luck with your elitist snobery. I wouldn’t doubt that well over half of the wealthy in America have ethical, moral, or literal crimes in their past that facilitated their current level of wealth. Sincerely, Ric H.